Medium term note
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A medium term note (MTN) is a debt note that usually matures (is paid back) in 5–10 years, but the term may be less than one year or as long as 50 years. They can be issued on a fixed or floating coupon basis. Floating rate medium term notes can be as simple as paying the holder a coupon linked to Euribor +/- basis points or can be more complex structured notes linked, for example, to swap rates, treasuries, indices, etc. When they are issued to investors outside the USA, they are called "Euro Medium Term Notes". Issuance of MTNs to investors based in the USA requires a separate US MTN program.
MTNs can be issued with a fixed maturity date (noncallable) or can be issued with embedded call or put options and triggers where the notes will redeem early based on certain parameters. MTNs are most commonly issued as senior, unsecured debt of investment grade credit rated entities which have fixed rates. MTNs offer more flexibility to the issuer and investor both in terms of structure and documentation.
Medium Term Note Program
The note are usually connected to a medium term note program, which is a funding program used by issuers to receive bond debt funding on a regular and continuous basis. Their programs can include more than one issuer although the issues are independent up to a maximum amount authorised. The advantage to issuers is that they are not required to produce a full suite of legal documents each time they want to issue notes. Instead, a series of underlying documents are amended with each issue by a pricing supplement / final terms which sets out the terms of each specific issue of notes. This makes access to debt funding easier and cheaper. Programs are registered in a supervisory authority such as the London Stock Exchange and the Luxembourg Stock Exchange.
Most large companies have established Medium Term Note Programs to finance their medium term financing needs. Countries also use these programs to access the capital markets.
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